How Far Will This New Chip Relationship Go?

Back in February, Advanced Micro Devices (NYSE: AMD  ) showed signs of a brand-new openness. The chip designer seemed destined to leave the world of exclusively Intel (Nasdaq: INTC  ) compatible processors and branch out into new arenas -- specifically, maybe an ARM Holdings (Nasdaq: ARMH  ) design or two. CFO Thomas Seifert clarified that point somewhat: "We have to be flexible to incorporate IP just to make sure that we can react to the needs of our customers."

Well, the AMD-ARM axis has matured beyond rumors and innuendo. This week, the companies announced two new things together:

  • First, they started up the brand-new Heterogeneous System Architecture foundation, in concert with a few other semiconductor heavyweights. The idea here is to create cross-platform programming standards that make it easier to squeeze value out of increasingly specialized chip designs. This is important for AMD, because its all-important Fusion platform is built around this exact concept. But this is the lesser of the two developments.
  • Far more interesting is this: AMD will incorporate ARM's security designs in future chips. Intel bought McAfee for nearly $8 billion to address hardware-based IT security; AMD signed an ARM license instead. This so-called TrustZone technology is a proven solution that's been around since 2004 -- but this is the first time the technology moves outside the ARM sphere.

To be clear, AMD is still not making ARM-based processors to compete with mobile-computing expert Qualcomm (Nasdaq: QCOM  ) or HSA partner Texas Instruments (NYSE: TXN  ) . That move might still come down the road, but so far it's just a matter of incorporating ARM's security concepts into otherwise fully x86-based chips.

That being said, AMD is clearly moving in the direction of fully integrated system-on-a-chip designs -- which is exactly where Qualcomm and TI make hay today. The open Fusion architecture makes it pretty easy (for professional chip designers, not us armchair hackers!) to plug in new modules such as graphics processors, memory controllers, physics modelers, or radio filters into AMD's core designs. ARM designs are important in many of these specialized fields and may become part of the AMD package in due time.

Down that road lies a trillion-dollar revolution, and AMD has already fired CEOs for not going after that opportunity with enough gusto. Current chief Rory Read won't make the same mistake, and neither will this company. To find the chipmaker our analysts think has a bright mobile future ahead, grab a copy of our limited-time special free report.

Fool contributor Anders Bylund holds no position in any of the companies mentioned. Check out Anders' holdings and bio, or follow him on Twitter and Google+. The Motley Fool owns shares of Qualcomm and Intel. Motley Fool newsletter services have recommended buying shares of Intel. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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